A landmark review into the UK’s water sector has recommended a major overhaul to the way water companies are regulated in the country, amongst many other changes.
The critical and wide-reaching report from the Independent Water Commission outlined 88 recommendations to the UK and Welsh governments to turn around the ailing industry.
Led by former Bank of England deputy governor Sir Jon Cunliffe, the review says that the current system is “failing to deliver much of what society demands and expects, including for the economy.”
The industry has faced criticism for seeing large sums of money paid out to shareholders while standards have dropped in the years since water companies were privatised.
Campaigners have estimated that since 1989 – when companies were privatised – £85bn has been extracted from the water sector in dividends and other payouts to shareholders.
The government has said it backs the review and is considering a piece of primary legislation to deliver many of the proposed changes.
Here are the key measures recommended in the report:
Scrapping Ofwat to overhaul regulation
The review recommends overhauling the regulators and replacing them with one body for England and one body for Wales.
For England, this would see Ofwat and the Drinking Water Inspectorate abolished, and the removal of the environmental regulation functions for the Environment Agency and Natural England.
Instead, a “joined-up” and “powerful” single integrated water regulator would be established.
In Wales, Ofwat’s economic responsibilities would be integrated into Natural Resources Wales, the review said.
Setting up regional planning authorities
Eight new regional water system planning authorities in England and one national authority in Wales should be set up, the review says.
This would involve devolving current planning responsibilities and transferring resources from the regulators to these new authorities, which would be responsible for developing water investment plans that reflect local priorities and voices.
Introducing stronger consumer protections
The commission recommends measures such as expanding the role of the voluntary Consumer Council for Water into an ombudsman to give stronger protection to customers and a clearer route to resolving complaints.
It also proposes the introduction of a national social tariff to provide consistent support for low-income customers who need help to pay their bills and to transfer responsibility for consumer advocacy to Citizens Advice.
Stronger environmental regulations
The report proposes stronger regulation on abstraction, sludge, drinking water standards and water supply.
It also recommends improving the process where companies collect and analyse wastewater discharges they make into waterways by introducing more digitalisation, automation, third-party assurance and inspections.
After one of the driest springs on record, it recommends compulsory water metering, changes to wholesale tariffs for industrial users and greater water reuse and rainwater harvesting schemes.
Tightening oversight of water company ownership and governance
The commission recommends new regulatory powers to block changes to water company ownership, for example, where investors are not seen to be prioritising the long-term interests of the company and its customers.
It also suggests new “public benefit” clauses in water company licences and recommends the regulator set “minimum capital” requirements so that companies are less reliant on debt and more financially resilient.
Public health reforms
The report covers legislative reforms to better manage public health risks in water, recognising the many people who swim, surf and enjoy other water-based activities.
These include public health objectives in water quality legislation, senior public health representation on regional water planning authorities and legislative changes to address emerging pollutants such as PFAs, also known as forever chemicals, micropollutants and microplastics.
Fundamentally resetting economic regulation
This recommendation includes a new “supervisory” approach that supports tailored decisions and earlier interventions in water company oversight.
The report also makes recommendations on the Price Review process, including changes to ensure companies are investing in and maintaining assets and to help attract long-term, low-risk investment.
Providing a clear strategic direction
The commission said both the UK and Welsh governments should publish a new long-term National Water Strategy with a minimum horizon of 25 years and interim milestones.
It also says a set of ministerial priorities specifically for the water industry should be issued to regulators every five years, replacing the current strategic policy statement.
Infrastructure and asset health reforms
The report sets out changes in how water infrastructure is managed, monitored and delivered to better safeguard the provision of water and management of wastewater for future generations.
They include new requirements for companies to map and assess their assets – such as pipes, treatment works and pumping stations.
It also calls for resilience standards that are forward-looking and applied consistently across the industry.
